What the Fed can control is demand in the economy, and it will be raising rates to try to “moderate demand in a way that lets the labor market get back in balance and help inflation get back to 2%,” he said.
At its policy meeting last week, the Fed raised its benchmark interest rate by a half-percentage-point increase, the biggest hike in over 20 years.
At the meeting, Powell said the Fed thought that “if the economy performs about as expected, that it would be appropriate for there to be additional 50-basis-point increases at the next two meetings.”
Asked about the possibility of an even larger rate hike — a 75-basis-point move that has only been made one time — Powell prevaricated
He quibbled with the suggestion that he had taken such a large move “off the table.”
“I said we weren’t actively considering that,” Powell said.
“But I would just say, we have a series of expectations about the economy. If things come in better than we expect, then we’re prepared to do less. If they come in worse than we expect, then we’re prepared to do more.”
Asked if “prepared to do more” meant a 75-basis-point hike, Powell said it was clear the central bankers would “adapt to the incoming data and the evolving outlook.”
Financial markets have been unsettled since the Fed’s meeting on May 4. The Dow Jones Industrial Average DJIA, -0.33% has fallen for six straight trading sessions, while the S&P 500 index SPX, -0.13% has flirted with bear-market territory. The yield on the 10-year Treasury note TMUBMUSD10Y, 2.901% has remained just below 3%.
